Valuation and risk management of vanilla Libor swaptions in a fallback

A procedure to price vanilla European Libor swaptions derived from the SABR model is presented

CLICK HERE TO DOWNLOAD THE PDF

Georgios Skoufis uses the SABR model to derive a valuation formula for a vanilla swaption whose payoff involves a Libor swap rate constructed from a nonlinear function of a swap rate on a risk-free rate index. The analysis shows that the convexity effects can be expressed as symmetric quadratic derivatives, which are valued analytically with the SABR model

The transition from an interest rate benchmark regime centred on forward-looking interbank offered rates

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here